Home sweet home

Ten years ago the world watched the US foreclosure housing crisis as thousands lost their homes in bad mortgage deals. Today, the crisis is still there for many people. Jack Crosbie reports:

Julius Gallishaw lives in the left half of a maisonette on a nice, safe street in Trenton, New Jersey. It has windows on three sides, which means sunlight comes through in the mornings and evenings. Looking north, he sees his lovely Japanese maple tree. Julius loves his house. And for the past three years he has been in a fight to stop his bank from taking it away.

It’s been 10 years since the worst of the mortgage crisis, which sent the country into the worst recession since the Great Depression. Many areas are Ok now but in cities like Trenton, the crisis is still there.

Julius and Ellen bought their house for $125,000 in 2002. It was difficult for them but they got a high-interest mortgage from Wells Fargo bank. This was a bank that the Federal Reserve bailed out later for $25 billion. The house had lots of space, with three floors for their big family: two adult sons from separate partners earlier in life, who gave them five grandchildren. They all needed space and care and love.
The interest rate was very high, so Ellen, who had better credit, took out her pension for the down payment. For almost 13 years, they made it work, and they went through the housing market crash and they paid off the mortgage, thanks to their two incomes. The two incomes were important, because the house wasn’t quite worth $125,000. The found this out later after they looked at all the paperwork,. Other houses in the neighbourhood were worth about $60,000.

‘It was bad lending,’ Julius says. ‘You know, we bought a house that wasn’t worth it. Ok, now we have got it. But with the two incomes, we were OK – we didn’t think that we were going to pay it off. We just thought we would leave it to the children.’
When they bought it, that didn’t seem like a crazy idea. In the early 2000s, banks and lending organizations were lending money to anyone and it wasn’t important that they could pay it back.

These were wonderful offers for millions of people: working class people of colour looking for a way out of urban centres, lower-middle class families trying to make a future, and even the people who were a little rich, stretching their salaries for a second or third house. Home ownership has been an important part of the American dream for hundreds of years. Julius and Ellen were chasing a dream sold to them over generations and, for 13 years, they had it.

But in 2015, Ellen started feeling ill. When she was driving home, she knocked over one of the planters under Julius’s Japanese maple tree. She had a lot of hospital visits and tests, which showed nothing. And then, one day, she was gone: when she was trying to leave the hospital with Julius, she had a big heart attack and died.

‘I always thought I’d die before her,’ Julius tells me. After Ellen died, he found it hard to do much more than leave the house and go to work. When he lost his job at a chemical inspection company later that year, things got worse. Soon, he was behind on the mortgage, car insurance, payments – more money was going out than was coming in, but it still wasn’t enough for the banks. ‘I had to make the decisions, and there were so many that I really couldn’t think.’

In the worst part of the crisis, when people couldn’t pay back their loans, banks sold their debt to investors wanting to make a profit. Homeowners called their bank to make a payment, and the bank said that they owed the money to another company. It was so confusing that homeowners were trying to save their homes but they were unsure who they needed to pay. They offered people like Julius the chance to ‘restructure’ loans, making a 30-year mortgage into a 40-year one. This makes more money out of the homeowner, says Peter Rose. He is managing director of ISLES, a non-profit in Trenton that helps with foreclosure problems.

‘The banks have never spent any of their own money on solving this crisis that they created,’ Peter says. ‘In fact, they made money by selling the mortgages, and then they made money when people went into foreclosure because the houses were not even worth a fraction of what they were purchased for.’ In other words, banks were more than happy to lend buyers as much money as they wanted. This allowed them to pay too much for houses whose values went down quickly. Julius’s house is worth a fraction of what he paid for it but the bank still wants the full amount.

In Trenton, the average value of a home is $46,720, if you look at website Zillow. Some houses are under foreclosure and others have gone to auction. Across the road, on the other side of the park in Ewing Township, which is 63 per cent white, the average home value is $180,807. These differences are like this all over America, and they were worse with the crisis. African-Americans lost about 50 to 60 per cent of their money after the housing bubble.

Ewing hasn’t escaped completely. New Jersey had big problems. In 2009, at the end of the housing crash, the state reported over 70,000 new foreclosures. But in Trenton, and even in Ewing, and many other townships and cities across the state, the foreclosure crisis is still there. In 2017, the state reported nearly 60,000 foreclosure notices, auctions or bank repossessions. If Julius loses his house, which is still possible, the starting price in auction will be about $36,000.

But for now, he’s decided to fight. A caseworker at ISLES applied for him to have federally funded help, from Jersey Home Saver. If he’s accepted, this will help him to pay his mortgage payments. Julius tells me that Elena Hung-Shim, his caseworker, thinks he has a good chance of being accepted.

Hung-Shim says the crisis in New Jersey traps homeowners like Julius in debt – and more vulnerable ones like seniors who cannot work. In the crisis banks received billions in bailout money, but the ordinary people in Trenton did not. Julius has a good chance with the Home Saver programme because he has a new, full-time job with a chemical company. But Hung-Shim tells me the state often says no to people who can’t prove they’re working. If Julius loses his job tomorrow (which he says is unlikely), he will lose his family home. But Julius will probably be OK. But he still owes the original $125,000 that he and Ellen paid for the house, so many years ago. He says, ‘I believe I’m in a good place now. We’ll just wait and see what happens.’